Market Performance Summary

Source: www.YCharts.com

Notable Market Headlines

Investors continued to take a more conservative stance this week seeming to shy away from more risky assets. Concerns are mounting about the long-term impact of a trade war and the impact it could have on world economic growth.

Large U.S. stocks closed the week lower by -1.1% as measured by the S&P 500 while the Dow Industrials lost just -0.7% but has been down for 5 consecutive weeks. Small U.S. stocks lost -1.3% for the week. Both large and small stocks U.S. are holding onto strong gains for the year up +13.2% and +12.6% respectively. The S&P 500 is just -4.1% off its record high.

Technology stocks were among the worst performers for the week taking a toll on the performance of the tech-heavy NASDAQ Composite. This index was down -2.3% for the week impacted by large price drops in stocks such as Broadcom (AVGO), NetApp (NTAP), and Western Digital (WDC) on concerns their business in China could come to a quick halt. Energy stocks also suffered big losses with the sector falling -3.3% for the week as the price of oil fell below $60 per barrel.

International stocks held up better this week with average developed country stocks unchanged. Among the developed countries though European markets were down -0.9% while Australian stocks gained an impressive +2.9%. Emerging markets did decline by -0.8% for the week with one of the biggest losses being China’s market down -2.5%. As the accompanying graph shows, China’s market was keeping up with the S&P 500 through late April but has since declined sharply holding onto a year-to-date gain of just +2.2%.

Source: www.YahooFinance.com

It was a mixed bag for the non-traditional asset classes with real estate stocks coming in unchanged and off less than -0.1% from record highs. Gold inched higher by +0.5% possibly driven by investors seeking safety. Commodities were the big loser, down -3.1%, as the price of oil suffered following requests by President Trump for OPEC to raise production in an effort to lower gasoline prices.

Bond prices moved higher by +0.4% for the week and are now higher by +2.9% year-to-date. The yield on the benchmark U.S. 10-Year Treasury Note closed at 2.326% after reaching its lowest yield of the year late in the week on concerns about slowing economic growth.

Stock Highlights

Target (TGT), a general merchandise retailer with 1,844 stocks as of fiscal 2018, was one of the retailers reporting a strong quarter topping Wall Street expectations. Total revenue inched higher to $17.63 billion and earnings per share rose by +7.0%. The highlights though were digital sales surging +42%, as shoppers embrace curbside pickup, as well as same-store sales jumping +4.8%. Furthermore management maintained its full year earnings guidance in spite of concerns that higher tariffs could have a negative impact. Investors were impressed pushing the stock higher by +15.1% for the week making it the best performer among the S&P 500 stocks. Year-to-date it is higher by +23.4%

L Brands (LB) was another winning retail stock this week. This retailer of women’s intimate apparel and other products under the names of Victoria’s Secret and Bath & Body Works also reported results with both revenue and earnings topping Wall Street expectations. This strength was accompanied by continued disappointment in the Victoria’s Secret brand with same-store sales falling -5%. Management is addressing this and has hopes that a new product mix this fall will improve results. All this said the stock jumped +10.7% for the week, making it one of the best performers, but remains down for the year by -3.2%.

Kohl’s (KSS), another general merchandise retailer with 1,159 stores in 49 states, disappointed investors this week making it one of the have nots among retailers. The company reported earnings per share below expectations as same-store sales fell -3.4% which was more than expected. The company blamed bad weather as well as promotions that impacted margins for the shortfall. At the close of the week the stock was down -19.6%, the worst performer among the S&P 500 stocks, and now down -22.9% for the year.

Foot Locker (FL), a sports shoes and apparel retailer worldwide, was also among the have nots this week with investors disappointed in the company’s rate of growth. The company reported sales, earnings, and same-store growth that were all above year-ago levels but below Wall Street expectations. As the accompanying graph shows the company has had inconsistent growth in quarterly sales. Investors were clearly disappointed in the report with the stock dropping -19.6% for the week now down -16.5% in 2019.

Source: www.YCharts.com

Qualcomm (QCOM), holding patents to technology used in many mobile devices, suffered a blow this week. A federal judge ruled the company had illegally suppressed competition for wireless chips putting is lucrative licensing business at risk. This stock has been volatile as the accompanying graph shows peaking in 2014, falling -45% by early 2016, then recently jumping to all-time highs about a month ago as it settled a lawsuit with Apple (APPL). This week the stocks dropped -18.8% but is still higher by +16.3% year-to-date.

Source: www.YahooFinance.com

Economic Indicator - Reported

New Home Sales came in slightly better than expected but still down compared to the prior month’s strong report. At a rate of 673,000 homes annually, year-to-date sales are higher by 6.7% compared to the same period last year. According to this report prices are higher by 8% compared to a year ago with the median at $342,200.

Existing Home Sales came in below expectations at an annual rate of 5.19 million homes. The Northeast was the worst performing region with sales falling -4.5% while the West saw a +1.8% increase. At the current pace of sales it would take 4.2 months to exhaust supply.

Durable Goods Orders, orders for items with a useful life of 3 years or longer, dropped -2.1% on a sharp decline in orders for Boeing jets. It was not only jet orders that fell though as the report showed weakness in core capital-goods and a slowing pace of business investment.

Economic Indicators – Upcoming

The following economic data is expected in the coming week: